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Think working capital isn't important to your business? Think again. It doesn't matter how clever your products or how keen your customers, if you haven't got working capital on hand, you'll be out of business in the blink of an eye. Some savvy entrepreneurs have sharply reduced the gross margins they need by developing working capital models that have disrupted their industries. Could you be the disrupter that does this to your industry? Or are you at risk of having this done to you? As you'll see in this chapter, working capital models form the foundation for some of today's most interesting and revolutionary business models--like Dow Jones and Costco, both profiled here. The authors demonstrate why a seemingly innocuous concept like working capital is so important and why thinking strategically about cash and cash flow is the key to keeping your business moving. This chapter was originally published as Chapter 6 of "Getting to Plan B: Breaking Through to a Better Business Model."

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Every aspiring entrepreneur has a Plan A. And virtually everyone believes that their Plan A will work. Unfortunately, they are usually wrong. But what separates entrepreneurs who succeed from those who don't is what they do when their first plan fails. Getting from Plan A to Plan B and beyond requires the development of a business model that really works. In this chapter, the authors describe why your Plan A--yes, yours--probably won't work, introduce a process for stress-testing your Plan A, and demonstrate how being open to experimentation will help you build a viable business model, whether it be your Plan B, C, or Z. This chapter was originally published as the Introduction of "Getting to Plan B: Breaking Through to a Better Business Model."

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More and more tech-oriented start-ups are using "negative working capital"--cash received from customers in advance--to finance their businesses, freeing founders to focus on strategy instead of hustling for early investors. Five customer-funded business models that can work for any business in any industry.

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You have a new venture in mind. And you've crafted a business plan so detailed it's a work of art. Don't get too attached to it. As John Mullins and Randy Komisar explain in "Getting to Plan B," new businesses are fraught with uncertainty. To succeed, you must change the plan in real time as the inevitable challenges arise. In fact, studies show that entrepreneurs who stick slavishly to their Plan A stand a greater chance of failing-and that many successful businesses barely resemble their founders' original idea. The authors provide a rigorous process for stress testing your Plan A and determining how to alter it so your business makes money, solves customers' needs, and endures. You'll discover strategies for: (1) Identifying the leap-of-faith assumptions hidden in your plan, (2) Testing those assumptions and unearthing why the plan might not work, and (3) Reconfiguring the five components of your business model-revenue model, gross margin model, operating model, working capital model, and investment model-to create a sounder Plan B. Filled with success stories and cautionary tales, this book offers real cases illustrating the authors' unique process. Whether your idea is for a start-up or a new business unit within your organization, "Getting to Plan B" contains the road map you need to reach success.

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While you may think that your company can get away with having a strong revenue model or healthy gross margins alone, companies are most successful when the five elements of their business models--revenue, gross margin, operating expenses, working capital, and investment--work together. In this chapter, the authors examine three highly entrepreneurial companies whose success rested on their multidimensional business models: Zara, Amazon, and Celtel International in Africa. These examples demonstrate that creating a business model--considering one element at a time and then all of them together--is a fundamentally strategic activity. The strategy, as expressed in the five business model elements, is what drives cash flow, profitability, and growth. This chapter was originally published as Chapter 8 of "Getting to Plan B: Breaking Through to a Better Business Model."

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There are five elements of any company's business model that determine whether a business or organization can survive and prosper: revenue, gross margin, operating expenses, working capital, and investment. If revenue is the lifeblood of a company, gross margin is the safety and security that is equally important. Generating adequate gross margins from your revenue ensures that there's money available to pay the rest of your company's costs. If extra money is generated, it can be used to grow the business or to take that trip to Morocco you've been meaning to take. But if your gross margin is insufficient to cover your other costs, profitability will be elusive. In this chapter, the authors will help you devise a gross margin model that will give your company some financial breathing room by examining the stories of three inspiring companies: eBay, Toyota, and Patagonia. This chapter was originally published as Chapter 4 of "Getting to Plan B: Breaking Through to a Better Business Model."

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There are five elements of any company's business model that determine whether a business or organization can survive and prosper: revenue, gross margin, operating expenses, working capital, and investment. Revenue is to any business--and to most other organizations, too--as air, food, and water are to mankind--it is fundamental to survival. Without revenue, a business is as lifeless as a plant without water. This chapter examines six questions that underlie every revenue model and demonstrates how three companies--Google, Silverglide Surgical Technologies, and China's interactive gaming leader, Shanda Interactive--identified a customer problem they could resolve and developed healthy revenue models that paying customers were willing to support. The authors' goal? To help you do the same. This chapter was originally published as Chapter 3 of "Getting to Plan B: Breaking Through to a Better Business Model."

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As entrepreneurs, many of our assumptions and initial plans are shaped by the examples of companies and business models that came before. But what happens when these analogs reach the limit of what they can tell us? A leap of faith is required, driven by a burning question that cannot be answered without some real-world data. Once hypotheses have been formed, we need to test them as quickly and cheaply as possible to measure the results of our risks. In this chapter, the authors outline the process of dashboarding--keeping a systematic record of your hypotheses and their results. Dashboarding will allow you to constantly test your assumptions at every stage of your journey from Plan A to a Plan B or C or Z that will deliver you the kind of success you seek. This chapter demonstrates the importance of this iterative process using the inspiring cases of GlobalGiving and Aggregate Knowledge. This chapter was originally published as Chapter 2 of "Getting to Plan B: Breaking Through to a Better Business Model."

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Entrepreneurs drive economic growth all over the world. But the fact is, most successful ventures represent the evolution of a business idea over time--from initial concept, or Plan A, through multiple iterations--rather than the execution of an entrepreneur's original vision. How do you go from the germ of an idea to one that's truly compelling, with a viable business model to match? One tested approach is to learn from the experiences of others, using both successful and failed endeavors to inform your decisions and the development and testing of your business hypotheses. This chapter shows how Apple, Pantaloon, and the African Leadership Academy used analogs--successful predecessors worth mimicking--and antilogs--successful and unsuccessful predecessors from whose example you choose to deviate--to arrive at the most compelling business model. This chapter was originally published as Chapter 1 of "Getting to Plan B: Breaking Through to a Better Business Model."

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Operating costs are not glamorous. They are "below the line," and often get less attention than they deserve. But operating expenses, if not kept in check, can bankrupt a company. In this chapter the authors demonstrate how learning from your competitors can help you build an operating model that is central to the success of your business. They profile three exemplars: Ryanair, Oberoi Hotels, and ZoomSystems. This chapter was originally published as Chapter 5 of "Getting to Plan B: Breaking Through to a Better Business Model."

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